FHA loans: buy with 3.5% down and flexible credit guidelines
An FHA loan is a mortgage insured by the Federal Housing Administration. It is popular with first-time and credit-rebuilding buyers because it allows a 3.5% down payment and more flexible credit and gift-fund rules than many conventional loans. You repay the loan like any mortgage; FHA insurance protects the lender, not you as a free grant.
NMLS #1660690 · Reviewed by UMortgage+
Key facts
Figures below are typical industry ranges for education. Exact overlays, credit floors, and limits change and must be confirmed with a loan officer against current NEXA Lending guidelines and your scenario.
| Minimum down payment (typical) | 3.5% with qualifying credit; higher down payment may be required at lower scores (lender overlays apply). |
|---|---|
| Credit score (typical range) | Often ~580+ for maximum financing; some lenders allow lower scores with more down. Confirm overlays. |
| Debt-to-income (DTI) | Automated underwriting can approve higher DTI with compensating factors; manual underwriting is tighter. |
| Mortgage insurance | Upfront MIP (often financed) plus annual MIP. Duration depends on down payment and origination date. |
| Loan limits | County FHA limits; see for your county. |
| Occupancy | Primary residence (with limited exceptions for HUD REO / relocation scenarios—confirm guidelines). |
Who it's best for
- First-time buyers with limited savings
- Buyers rebuilding credit after life events
- Purchase with gift funds or seller concessions within FHA caps
- Borrowers pairing FHA with local down payment assistance
Who should look elsewhere
- Strong-credit buyers who can get cheaper conventional pricing with cancelable PMI
- Eligible veterans who prefer VA (often 0% down, no monthly MIP)
- Investment property purchases (FHA is for primary residences)
Pros and cons
Pros
- Low 3.5% down payment
- More flexible credit and gift-fund rules than many conventional loans
- Works well with many DPA programs
- Assumable loans can be a future selling feature
Cons
- Upfront and annual mortgage insurance premiums
- MIP often lasts for the life of the loan if you put less than 10% down
- Property must meet FHA minimum standards
- Loan limits cap purchase price in expensive markets
How it works in 4 steps
Discovery call or apply
Share your goals, credit picture, and timeline. We check which programs and pricing scenarios fit.
Compare side by side
See rate, payment, cash to close, and mortgage insurance options before you choose.
Underwriting
We lock when you're ready, order any needed appraisal, and clear conditions.
Close & fund
Sign documents and fund. We stay in touch with you and your agent or title company.
Illustrative payment on a $300,000 FHA purchase
Assume $300,000 price, 3.5% down ($10,500). Base loan ≈ $289,500 before any financed upfront MIP. At a sample note rate of 6.5% (placeholder only): P&I on ~$289,500 is about $1,829/month before taxes, insurance, and annual MIP.
On $400,000 with 3.5% down ($14,000), base loan ≈ $386,000. At the same sample 6.5%: P&I about $2,439/month before taxes, insurance, and MIP.
Not a rate quote, APR disclosure, or commitment to lend. Actual rates, points, and payments depend on credit, occupancy, property, lock period, and market conditions on the day you lock. Ask a loan officer for a personalized Loan Estimate.
Frequently asked questions
Do you pay back an FHA loan?
Yes. An FHA loan is a regular mortgage you repay every month. The Federal Housing Administration insures the loan for the lender; that insurance is why FHA can allow lower down payments and more flexible credit. You still owe the full principal and interest. Some down payment assistance paired with FHA is a grant or forgivable second loan—that piece may not need repayment.
What credit score do I need for FHA?
Many lenders follow a common industry pattern: about 580+ for maximum financing (3.5% down) and 500–579 for higher down payments when the lender allows it. Individual lender overlays are often higher. Ask for a scenario review rather than relying on a blog number.
FHA vs. conventional: which should I choose?
Choose FHA when credit is thinner, down payment is small, or gift funds and seller concessions stretch further under FHA rules. Choose conventional when your score and down payment support better pricing and you want cancelable PMI. We run both.
Can I remove FHA mortgage insurance?
Most FHA loans made today with less than 10% down keep annual MIP for the life of the loan. With 10%+ down, MIP often lasts 11 years. The usual way to stop paying FHA MIP is to refinance into conventional once you have enough equity and credit strength.
What are FHA loan limits in my area?
FHA sets county loan limits each year. For your county, see . Limits differ for 1–4 unit homes.
Can I buy a condo or 2–4 unit with FHA?
Yes if the condo project is FHA-approved (or qualifies under single-unit approval rules when available) and 2–4 unit properties meet owner-occupancy and reserve requirements. Condos need extra HOA documentation.
Is FHA only for first-time buyers?
No. First-time and repeat buyers can use FHA if they meet credit, income, and occupancy rules. Some local assistance programs add a first-time buyer requirement on top of FHA.
Educational content only. Guidelines change. Confirm details with UMortgage+ powered by NEXA Lending, LLC, before you apply.
Check FHA eligibility
a loan officer will compare FHA and conventional side by side. Call (480) 233-7897 or apply online.